As seen in this month’s Master Investor Magazine
In a two-party political system, like the one we evidently still have in the UK, it could be argued that every policy, every speech, every bit of political posturing, is gerrymandering to some degree. Both of the main parties seek to take away from those that vote for the opposition party, and give to those that (might) vote for them. Since elections are decided by the undecided, they are the ones this behaviour is mostly aimed at.
Democracy is not what we think it is. There’s a perception that it represents fairness and equality. It doesn’t. It’s essentially mob rule. And for the last 45 years that’s meant the Baby Boomers have, and still do, dominate the polls. It’s no accident that the pensions time bomb wasn’t defused until all the Baby Boomers had retired a few years back, allowing them to take their lovely final salary pensions, whereas those retiring today are facing down zero interest rates, and thus no chance of buying a decent annuity.
The original Homes for Votes gambit was of course by Moses, and still today homes are a very emotive thing, and no more so than in British society. A castle it may not be, but there is a broad perception that anyone in employment (even unemployed) has the right to get on the property ladder. A sense of entitlement is evidently common to not only the rich, but the poor too, just not the middle.
So I’ve come up with a solution to the main causes of the property bubble in London and the South East. And as you read, do bear in mind my maxim, borrowed from Einstein: “If at first, the idea is not absurd, then there is no hope for it.”
1) Raise Interest Rates
The main thing pushing up housing costs is artificially low interest rates. This is disenfranchising savers. It also means that we are subsidising those who bought houses with mortgages they couldn’t really afford, and by keeping interest rates low we are basically handing them free money. It’s also undermining those who have been saving for a deposit (saving is a very stabilising thing in a modern economy). Instead they’re encouraged to borrow a higher percentage to valuation. So a tax on being responsible, you might say, redistributing wealth to the irresponsible.
Raising rates would cause those who wouldn’t and shouldn’t have been able to borrow, had interest rates been at sensible levels, to be repossessed. And so they should be. Why should we subsidise them? This would soon cause more stock to be available and thus reduce prices.
2) Relocate Those Who Don’t Need to Be in London
For those of us in the private sector, we are always forced to make economic decisions we don’t like. Decisions that never inconvenience those receiving government assistance at all. Many of us are now moving out of London, buying properties in the Home Counties because it’s better value, and also a better quality of life. In the interests of fairness we need to apply the same logic to those in public housing. Particularly for those who don’t work, and are unlikely to work, or who we are subsidising to a massive degree to live in postcodes most of us can only dream of, or who live in an over-crowded area: move them out of London.
According to a headline on the BBC News site the other day, “[a] third of Londoners cannot afford basic costs”. Great. Move somewhere cheaper then. It’s not rocket science. (Rocket science, if I’m not mistaken, is the art of creating green salads with lettuce hitherto unknown.)
3 Make Council Tenants Share
In the private sector there are hundreds of thousands of us having to share. We don’t get the luxury of extra rooms when the other tenants move out, and get to stay on at no extra cost. That’s just not how it works. There’s a lot of capacity in public housing, it’s just being ignored. The problem is the sense of entitlement I referred to earlier. You house someone and subsidise their rent, and they act like they own the place. They don’t. Spare room? Here’s your new house mate. That’s how that works. At least it does for the rest of us. This would take the pressure off the shortage of council houses. Although in the longer term we need to consider whether council housing is meant to be a stop-gap or a permanent solution. Actually it is, practically speaking, a way to reduce crime, but that’s another month’s column inches to look forward to!
I came up with the sharing idea when having a conversation online with a real lefty. I say conversation but you can’t really call it a conversation when he was just responding in a PC way to pre-programmed trigger words and phrases, like a typical social product of a child-minding service thinly disguised as an education system, mistakenly believing that it’s more important to try than to succeed in life. And he so nearly does have his own mind. But not quite. Anyway, to wind him up, since he made me think of it, I emailed the Housing Minister with my idea. They don’t seem to have done much with it so perhaps a reminder…
4 Modify Right to Buy to Include Responsibilities When Selling
Those of us who have not had the chance to capitalise on the free money bonanza that is the Right to Buy would surely not support the policy in any way. We all know since its inception in the Thatcher era, everyone who could ‘helped’ their dear old mum to buy her council place, and then sold it as soon as possible to reap the cash reward. That’s the problem. It’s a subsidised purchase. When selling, a pro-rata cut of the profit, at the very least, should be repayable to the council that sold the house.
The Help to Buy scheme is no better in terms of keeping a lid on prices. It too creates imbalance.
To contextualise all of the above, a good example is a bus and a taxi. If you can afford a private taxi then you can sit in it alone. If not then you may have to share. If you’re on a bus you cannot expect to have any control over the other passengers. Still you might hear remarks of entitlement, like an indignant “do you mind not reading my Evening Standard over my shoulder?” Your response should be “mate, get a taxi if you want that kind of luxury. Want me to give you something towards the cost of your Evening Standard then, in case my eyes wear it out by looking at it” followed by the obligatory expletive, under your breath. Or imagine taxi passengers that had no money and refused to get out at the end of their journey.
Notes: for those who aren’t Londoners, the Evening Standard is now a free newspaper.